With some of the largest fields ever found in the Gulf of Mexico just starting to be developed, gas production from the deepwater Gulf is increasing at a rapid rate and should be more than adequate to offset declines in production from the Outer Continental Shelf, according to a new analysis by Energy and Environmental Analysis Inc.

“A large amount of new productive capacity continues to be added to the deepwater play each year,” EEA said in its Monthly Gas Update. “In addition, the quality and productive capacity of new fields coming online has not declined. This implies that the deepwater play is not ‘tapering off,’ but continues to be an increasingly important component of U.S. gas supply.”

EEA’s recently completed comprehensive update of its deepwater Gulf field level analysis reveals that dry gas production from the deepwater region will increase to 4.87 Bcf/d this year from 4.30 Bcf/d in 2002 and should rise to 5.51 Bcf/d in 2004.

The Minerals Management Service dramatically increased its assessment of the undiscovered deepwater potential of the deepwater to 130 Tcf from a 1995 assessment of only 46 Tcf.

“Combining the MMS assessment and our estimate of what has been found to date, about 80% of the 130 Tcf of undiscovered resource remains to be found,” EEA said.

EEA said the eastern end of the deepwater play is gaining momentum both in terms of production and new discoveries, such as Thunder Horse. Most of the new activity and production is in water depths greater than 500 to 1,000 meters.

“Over the next few years, gas production from the deepwater is expected to increase an average of about 500 to 600 MMcf/d per year. This rate of increase would be sufficient to offset production declines in the shelf. Over the longer term, the rate of decline of shelf production is expected to slow, especially if the deep drilling play on the shelf is as successful as many in the industry anticipate,” EEA said.

EEA concluded that if future increases from the deepwater region are combined with a successful drilling program in the deep shelf play, “the Gulf of Mexico would experience a resurgence in gas production through 2015 and beyond.”

Nevertheless, gas demand also is expected to be on the rise. Also in its Monthly Gas Update, EEA predicted that Henry Hub gas prices would average $5 this winter, peaking at $5.20 and would fall back to an average of about $4.60 during the next storage injection season in 2004. EEA forecasts that prices will average $5 next year and rise to $5.60 in 2005, mainly because of increases in gas demand.

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